I got an email from Magento yesterday announcing that Ebay have agreed to buy Magento and is planning on making an open platform called X Commerce. This more or less completes Ebays ecommerce suite. They have already purchased Paypal, and the high end ecommerce system GSI Commerce which is used by the likes of Calvin Klein, Toys R Us and Adidas. Now with Magento, the portfolio of ecom products covers smaller retailer. Of particular interest in the new Magento Go platform which is a hosted ecom system. If Magento Go is integrated into paypal, ebay and orther ecom products, it could prove to be a killer app for the ecommerce world. However, the deal could have negative consequences for Magento. The main reason that Ebay is buying Magento is to increase revenues. It's online auction business is posting relatively flat growth, and Ebay will be keen to see a return on their investment, possibly by increasing the prices of the Enterprise version of magento (or possibly replacing it with the GSI Commerce suite) and there is a chance that the open free version of Magento could be overshadowed by the X Commerce platform, so updates to the free version will be less frequent. Magento have made assurances that the platform will continue to support current vendors and remain open.

The deal is set to be finalised in the third quarter of 2011.